The ‘gig economy’ is coming. What will it mean for work?
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The ‘gig economy’ is coming. What will it mean for work?

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Not so long ago, the only people who looked for “gigs” were musicians. For the rest of us, once we outgrew our school dreams of rock stardom, we found “real” jobs that paid us a fixed salary every month, allowed us to take paid holidays and formed the basis for planning a stable future.

Today, more and more of us choose, instead, to make our living working gigs rather than full time. To the optimists, it promises a future of empowered entrepreneurs and boundless innovation. To the naysayers, it portends a dystopian future of disenfranchised workers hunting for their next wedge of piecework.

 The ‘gig economy’ is coming. What will it mean for work?In the US, the “gig economy” is now so salient that the phrase and issues have entered the early exchanges of the presidential race. Earlier this month, as one frontrunner, Jeb Bush, took a well-publicised Uber ride to signal solidarity with the company, another, Hillary Clinton, was more cautious in her support. In a speech laying out her economic plan, she said: “This on-demand, or so-called gig, economy is creating exciting economies and unleashing innovation. But it is also raising hard questions about workplace protections and what a good job will look like in the future.”

Today’s digitally enabled gig economy was preceded by marketplaces such as ELance and oDesk, through which computer programmers and designers could make a living competing for short-term work assignments. But the gig economy isn’t just creating a new digital channel for freelance work. It is spawning a host of new economic activity. More than a million “makers” sell jewellery, clothing and accessories through the online marketplace Etsy. The short-term accommodation platforms Airbnb, Love Home Swap and onefinestay collectively have close to a million “hosts”.

This explosion of small-scale entrepreneurship might make one wonder whether we are returning to the economy of the 18th century, described by the economist Adam Smith in his book An Inquiry Into the Nature and Causes of the Wealth of Nations. The economy Smith described was a genuine market economy of individuals engaging in commerce with one another.

This explosion of small-scale entrepreneurship might make one wonder whether we are returning to the economy of the 18th century, described by the economist Adam Smith in his book An Inquiry Into the Nature and Causes of the Wealth of Nations. The economy Smith described was a genuine market economy of individuals engaging in commerce with one another.

Over the following two centuries, however, the emergence of mass production and distribution yielded modern corporations. The entrepreneurs of Smith’s time gave way to the salaried employees of the 20th century.

A different technological revolution – the digital revolution – is partially responsible for the recent return to peer-to-peer exchange. Most of the new on-demand services rely on a population equipped with computers or GPS-enabled smartphones. Furthermore, the social capital we’ve digitised on Facebook and LinkedIn makes it easier to trust that semi-anonymous peer.

Does this suggest a shift towards a textbook market economy? Granted, Uber, Airbnb, Etsy and TaskRabbit are quite different from organisations such as Apple, BP or Sainsbury’s. Because you aren’t actually renting a space from Airbnb, taking a ride in a car owned by Uber or buying a product made by Etsy. The platform simply connects you with a provider of space, a driver of a vehicle or a seller who runs a virtual shop.

But these platforms are by no means merely the purveyors of Smith’s invisible hand. Rather, the hand they play in facilitating exchange is decidedly visible. Uber, not individual drivers, sets prices. Airbnb trains its hosts to be better providers of hospitality. Etsy facilitates seller community building. All of them provide user-generated feedback systems, creating a high-quality consumer experience. Much like an organisation building a brand might.

In many countries, key slices of the social safety net are tied to full-time employment with a company or the government. Although the broader socioeconomic effects of the gig economy are as yet unclear, it is clear we must rethink the provision of our safety net, decoupling it from salaried jobs and making it more readily available to independent workers.

On the other hand, starting a new business has generally been an all-or-nothing proposition, requiring a significant appetite for risk. There are benefits to dipping your toes into the entrepreneurial waters by experimenting with a few gigs on the side. Perhaps this lowering of barriers to entrepreneurship will spur innovation across the economy.

Economist Thomas Piketty tells us that the main driver of sustained economic inequality over the past two centuries has been the concentration of wealth-producing “capital” in the hands of a few. This seems less likely if the economy is powered by millions of micro-entrepreneurs who own their businesses, rather than a small number of giant corporations.

But the latest generation of specialised labour platforms also raises the spectre of greater social inequality. We’ve now got apps through which providers will park your car (Luxe), buy and deliver your groceries (Instacart), and get you your drinks (Drizly). There’s a risk we might devolve into a society in which the on-demand many end up serving the privileged few.

Arun Sundararajan is professor at New York University’s School of Business. His new book about crowd-based capitalism will be published by the MIT Press in 2016

 

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